When James D. Armstrong, the founder of Scottsdalebased JDA Software Group, was forming his company in Cleveland in December 1985, he was determined to complete the process of incorporation before the end of that year.
"We were going to a trade show in January, and we wanted to be able to tell people that we were in our second year," he said.
From that hurried and humble beginning, JDA has grown to a $217 million-a-year worldwide business and the largest supplier of software to the retail industry.
The company celebrated its 20th anniversary Friday, a milestone that Armstrong, now JDA’s chairman, figures is an "amazing" feat. In an era when the longevity of many software firms is measured in only a few years, JDA has survived two economic time period a year ago. But earnings have quadrupled to $8 million to far this year.
JDA’s stock price also is gradually rising, having gone from $9.89 a share in April to close at $15.83 Friday on the NASDAQ stock market.
The third quarter was especially strong for software sales, with a 70 percent increase in software licenses recessions, the dot-com bust and Sept. 11, 2001, to become a solidly profitable enterprise.
It hasn’t all been smooth sailing for JDA. Last December, for instance, the company had to trim its work force by 13 percent, with the loss of 167 jobs.
"We had pretty steady growth up to 2002, but since then it has leveled off," Armstrong said in an interview Friday before presiding at an employee gathering to mark the 20th anniversary. "Some portions of our business such as consulting have been shrinking, but other portions have been growing. We’ve had to adjust to changes in our business."
This December the company is on an upward trend financially. Revenue for the first three quarters of this year is $160.7 million, about flat compared with the same over the prior-year quarter, said Hamish Brewer, JDA’s chief executive officer.
"We closed 76 deals in a highly competitive environment, including 12 multiproduct transactions and three large software contracts. . . . " Brewer said. "I feel very positive about our competitive positioning."
The company specializes in developing software for retailers and their suppliers that helps them control inventory, process transactions and manage their operations more efficiently. It also provides followup consulting and other services. Among the familiar names JDA has been able to snare as clients are Best Buy, Sears, CompUSA, Borders, Victoria’s Secret and Mervyn’s.
Armstrong is no longer the chief executive, having turned the reins over to Brewer, who ran the company’s European operations, in 2003. But Armstrong remains involved in strategy and planning as board chairman. His main interest is acquisitions, and the company has grown largely through purchase of other companies — nine in the past seven years.
That has proven to be a cheaper way of acquiring new software than developing it in house, he said. After the dotcom bust, a lot of good technology developed by small under-performing companies was available at bargain prices, he said.
The climate for acquisitions isn’t as good now because the strengthening economy has increased prices, but Armstrong said acquisitions remain the company’s best path for future growth.
"They’ll be available again," he said of startup companies that are developing new software products. A lot of venture capital money is available to help them get started, he said, but "the VC guys have a short time span (to gain a return on their investment)."